The recent announcement by the Duke and Duchess of Sussex to step back from their ‘senior’ royal status has brought back into focus that the duchess is a US citizen. When their marriage was first announced, several articles raised this, pointing out that, as such, she would still be liable for US tax. This raised concerns that the financial aspects of the royal family could come under the watchful eye of the Internal Revenue Service (IRS).
While this is something of a red herring, nevertheless, marriage between a US citizen and a non-American is quite common in the UK. This ‘split nationality’ of the marriage raises several tax issues that are quite different from a marriage where both parties are the same nationality.
The duchess, as a US citizen, is subject to all US tax laws. Being a member of the royal family provides her with no unique protection (other than sophisticated tax advisers who we can assume she has available to her). Thus, she must file US income tax returns on an annual basis reporting her worldwide income and pay tax on this whether she lives in the UK, Canada or anywhere else. Assuming she is or will become, a UK tax resident (subject to UK tax rules), she may be able to reduce her US tax by any tax she pays here. This would also hold true if she becomes a Canadian resident.